The Effect of Costs Stickiness on Conditional Conservatism and Information Asymmetry

Subject Areas : Management Accounting

S. Abbas Hashemi ¹ (Associate Professor of Accounting, Isfahan University)
Hadi Amiri ² (Assistant Professor of Economics, Isfahan University,)
Ali Nejati ³ (Master of Accounting, Isfahan University, Isfahan, Iran)

Received: 2014-06-22 Accepted : 2014-10-12 Published : 2014-12-22

Keywords: Conditional Conservatism, Cost Stickiness, Earnings of Timeliness Asymmet, Behavior Cost, information asymmetry,

Abstract :

Conditional conservatism appears in prompt recognition of loss toward earnings that is so called asymmetric timeliness of earnings. The asymmetric timeliness of earnings could arise from other phenomenon which is called costs stickiness. Costs stickiness means that costs are increasing during the sales increase, but when the sales decrease, the costs reduction will not be as much as prior increase. However, information asymmetry leads to apply more conservatism in financial reporting, that this relationship is also influenced by the cost stickiness. This research aims to identify the effect of costs stickiness on conditional conservatism and Asymmetry Information. In order to attain the research purpose, 115 companies among the listed companies in Tehran Stock Exchange during the years 1382 to 1391 (2003-2012) were selected as statistical samples For data analysis and hypothesis testing, multivariable regression and compound data have been used. Findings of research signify that after controlling for the effect of costs stickiness, conditional conservatism will decrease, which means that a part of asymmetric timeliness of earnings model is due to costs stickiness. Results also indicate that there is a significant positive relationship between the information asymmetry and costs stickiness, which decreases the effect of information asymmetry on conditional conservatism.